Second, environmental factors are starting to exert greater influence. According to International Air Transport Association (IATA), COVID-19 has contributed to a forecasted decline of 66% in air traffic in 2020. Additionally, climate change is fueling increased frequency and severity of extreme weather events. One peer-reviewed scientific study estimated the frequency of intense floods and storms could double within 13 years and, this year alone, we’ve already seen severe flooding in China and India, wildfires in California, typhoon-induced extreme flooding in Japan, and Hurricane Laura, the 16th costliest hurricane on record. In the longer term, rising sea-levels could potentially wreak havoc on many seaports and airports located at sea level. Businesses – especially those with large physical footprints – should expect climate-related disruptions as the norm for decades to come.
Finally, the global order is fundamentally reshaping. The impact of the rebalanced global system, which we discussed in Megatrends 2018, outlined the increasing likelihood that multipolarity will be the end state, as China tries to establish its own sphere of influence in opposition to the West, led by the United States. Escalating tensions around trade, technological innovation and healthcare suggest it’s highly unlikely we’ll revert to the cooperative past that characterized the period following China’s 2001 admission to the World Trade Organization. Yet cooperation will be key. Parag Khanna, Managing Partner of Futuremap, predicts an increased emphasis on regionalism, where economies in close proximity will be more inclined to coordinate.
Four imperatives for digitizing and automating your supply chain
So, how do you future-proof your supply chain? Start by comparing prevailing consumer preferences with your supply chain’s performance dimensions: cost, quality and delivery.
The linear global supply chain, designed with little flexibility in mind, has sought to meet consumer demands by lowering cost through scale, minimizing delivery time through inventory build-up and logistics capacity expansion, and upholding quality with stringent procurement processes. Yet the strain is apparent. These approaches are not scalable and run in counter to the flexibility needed for today’s consumers, while the severity and frequency of climate events and the ever-changing trade regulatory landscape is making the linear global supply chain untenable.